CMS moderates reimbursement policy

August 15, 2006

Fears of a death spiral in procedure reimbursement for outpatient imaging clinics eased a bit last week with the decision by the Centers for Medicare and Medicaid Services not to impose an additional 25% reduction in fees starting next year on technical payment for certain multiple imaging procedures. CMS, which sets policy for Medicare, imposed this year a 25% reduction in reimbursement for the second and subsequent images of contiguous body parts when taken in a single session. An additional 25% reduction (totaling 50%) was set to happen in 2007.

Fears of a death spiral in procedure reimbursement for outpatient imaging clinics eased a bit last week with the decision by the Centers for Medicare and Medicaid Services not to impose an additional 25% reduction in fees starting next year on technical payment for certain multiple imaging procedures. CMS, which sets policy for Medicare, imposed this year a 25% reduction in reimbursement for the second and subsequent images of contiguous body parts when taken in a single session. An additional 25% reduction (totaling 50%) was set to happen in 2007.

In reversing that second cut, CMS officials considered the compounded impact of payment reductions mandated by the Deficit Reduction Act (DRA) of 2005, along with comments it received from the imaging community, especially the American College of Radiology.

The DRA mandates caps to technical payments of the lesser amount of either the Physician Fee Schedule or the hospital outpatient prospective payment system. For imaging services subject to both the multiple imaging reduction policy and the outpatient hospital cap, CMS now proposes to first apply the multiple imaging adjustment and then apply the outpatient cap. This approach results in higher payments than if the cap were applied first, according to the proposed rule, which states "we believe it would be prudent to maintain the multiple imaging payment reduction at its current 25% level while we continue to examine the appropriate payment levels."

The CMS news comes on the heels of legislation introduced in the House of Representatives and, more recently, the Senate to delay DRA implementation until its effects on healthcare in the U.S. are better understood. The proposed legislation, spurred by lobbying efforts by the imaging community, calls for a delay until 2009.

The possibility of dramatically declining reimbursements has led to concerns among vendors that outpatient centers will hold off on capital purchases. The worst effects are expected next year, if the DRA is implemented, although vendors may begin to feel a pinch in the closing months of this year.

Lobbyists who spurred the reexamination of the DRA on Capitol Hill believe the battle to delay its draconian cuts could come down to the wire, as legislators break for the campaign trail, putting off action until after the November elections (DI SCAN, 8/8/06, Efforts to delay DRA cuts may depend on political maneuvering).

While sentiment seems to be aligning Congress and CMS against severe cuts, providers must still deal with what has been a tendency toward reimbursement constraints. In keeping with this historical trend, CMS plans to cut physician reimbursement across the board by 5.1%, according to the Medicare Physician Fee Schedule proposed rule for 2007 published Aug. 8 in the Federal Register.

This cut is mandated by the sustainable growth rate (SGR) formula, which compares the actual rate of growth in physician spending to a target rate, which is based partly on the gross domestic product. If the actual rate of growth exceeds the target rate, the update is decreased; if it is less, the update is increased.

Payment for physician services in 2005 increased 10% over 2004, which was faster than previously projected, due mainly to an increase in the number and complexity of services. Adding to the growth were more frequent and intensive office visits and more use of imaging techniques, according to the Federal Register.

Congress has intervened over the last four years to temporarily suspend the requirements of the SGR formula, essentially eliminating the cuts in physician payment rates. In passing these measures, however, Congress did not adjust the target, further increasing the gap between actual spending and the targets and exacerbating the already difficult situation, according to CMS.